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South Dakota Incentives and Workforce Development Guide

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Financing

Ethanol Incentive Bill (SB196): Since it passed during the 2011 legislative session, the Bill already has made $6 million of new funding available for a Revolving Economic Development Initiative loan fund and $2.5 million for new ethanol infrastructure at retail fueling stations. Through a partnership with the ethanol industry, the legislature repurposed funding a total of $10 million to secure additional capital for the Revolving Economic Development Initiative (REDI) Fund. The REDI Fund is one of South Dakota’s primary economic development financing tools. In addition, through an incentive program created by SB196, $3.5 million in funding will be provided to encourage additional ethanol consumption and blender pump installation.

Microloan SD: A partnership with the South Dakota Development Corporation and Governor’s Office of Economic Development (GOED). These loans are made available to small businesses within the borders of South Dakota and South Dakota residents, including main street and retail operations, for working capital, equipment, real estate or other fixed asset project costs.

Microloan Express Program: Introduced to streamline the MicroLOAN application and approval process. The MicroLOAN Express operates in the same fashion as the MicroLOAN, with the following exceptions: If an applicant qualifies under the policies and procedures of the MicroLOAN and they receive bank or credit union approval, approval under the MicroLOAN Express will be automatic as long as the MicroLOAN Express portion is in a pro-rata first collateral position with the bank or credit union. The bank or credit union must file all of the documents it requires of the applicant, as well as all internal documents relating to the loan with the Governor’s Office of Economic Development in order to receive the paperwork relating to the MicroLOAN Express loan. The MICROLOAN can also partner with other local revolving loan funds. The program guidelines are the same other than the requirement for the revolving loan fund to share the collateral in a first position with MicroLOAN.

Revolving Economic Development & Initiative (REDI) Fund: Provides permanent financing for land, building, machinery and equipment and associated installation costs. Designed to help promote job growth in South Dakota, this low-interest loan fund is available to start-up firms, businesses that are expanding or relocating and local economic development corporations. The REDI Fund provides up to 45% of a project’s total cost. Companies should secure interim (construction) financing, matching funds for permanent financing and be able to provide a 10% minimum equity contribution before applying to the Board of Economic Development for a REDI Fund loan. It offers fixed rate interest, which is currently 2%. Loans may be amortized up to 20 years on land and buildings and up to 10 years on equipment, with a balloon payment due after five years.

Small Business Administration (SBA) 504: Offers subordinated, long-term fixed rate financing (10-20 years) at reasonable rates (near long-term U.S. Treasury bond rates) to healthy and expanding small businesses. The 504 Program is available for fixed asset purchases only: land, building and equipment with a useful life of 10 years or more. Working capital, inventory and venture capital are NOT eligible. SBA 504 financing is “permanent” take-out” financing. Interim or construction financing must be utilized to complete the project.

Bond Financing: Provides small businesses with access to the public bond market.

Community Development Block Grant (CDBG): Provides matching grants to local governments, municipalities and counties. The program allows the state to fund a variety of different projects in small cities and rural areas. All projects must meet one of HUD’s national objectives, with the primary objective to benefit people of low-moderate income (LMI).

South Dakota WORKS: Business/commercial loans for businesses needing working capital. The term is one to five years and the loan amount is up to $1 million with a minimum amount of $20,000. Eligible borrowers include businesses seeking new financing and certified development financial institutions that meet US Treasury guideline. Borrowers can only have one WORKS loan program at a time for a company. Funds can be used for business purposes such as startup costs, working capital, payroll, inventory needs and new construction loans.

Workforce Development

Workforce Development Training: Provides matching grants to assist companies with up to 50% of eligible training expenses.

Economic Development Partnership Program

Purpose: This program provides matching grants to assist in funding equipment and training needs, new staff or to elevate existing part-time staff, for the purpose of developing or expanding local and community economic development programs. Economic Development Partnership Grants may also be used to commence or replenish local revolving loan funds for the purpose of developing or expanding housing, community development and economic development programs.

Who is Eligible: Any nonprofit development corporation, tribal government, municipality, county or other political subdivision of this state may apply to the Board of Economic Development for an Economic Development Partnership Grant under this program.

Payment: Any funds awarded under the economic development partnership fund shall be provided on a matching basis. The funds awarded to a recipient for staffing may be distributed over a four-year period with 40 percent being distributed in the first year, 30 percent in the second year, 20 percent in the third year and 10 percent in the fourth year. Over the four-year period, the recipient shall match the total funds received from the economic development partnership fund.

How it Works: Applicants work with the planning districts to submit a completed application to the board before they will be considered for funding. The board will consider applications on a quarterly basis. Any application received by July 31st will be considered at the board’s September meeting; any application received by October 31st will be considered by the board at its December meeting; any application received by January 31st will be considered by the board at the board’s March meeting, and any application received by April 30th will be considered by the board at the board’s June meeting.

If the board approves the application, the applicant must comply with the conditions of the approval to remain eligible for the grant. GOED will issue payment within 30 days of the applicant providing the documentation required by GOED to establish it has complied with the conditions of the grant.

Local Infrastructure Improvement Program

Purpose: This program provides grants to assist in funding the construction or reconstruction of infrastructure for the purpose of serving economic development projects.

Who is Eligible: Any political subdivision of this state, tribal government or local development corporation may apply to the Board of Economic Development for a Local Infrastructure Improvement Grant under this program.

How it Works: Applicants work with the planning districts to submit a completed application to the board before they will be considered for funding. Except as otherwise directed by the board, the board will consider applications on a quarterly basis. Any application received by July 31st will be considered at the board’s September meeting; any application received by October 31st will be considered by the board at its December meeting; any application received by January 31st will be considered by the board at the board’s March meeting, and any application received by April 30th will be considered by the board at the board’s June meeting.

If the board approves the application, the applicant must comply with the conditions of the approval to remain eligible for the grant. GOED will issue payment within 30 days of the applicant providing the documentation required by GOED to establish it has complied with the conditions of the grant.

Reinvestment Payment Program

Purpose: This program is available to assist companies in offsetting the upfront costs associated with relocating or expanding operations and/or upgrading equipment in South Dakota. The program allows for project owners to receive a reinvestment payment, not to exceed the South Dakota sales and use tax paid on project costs, for new or expanded facilities with project costs in excess of $20,000,000, or for equipment upgrades with project costs in excess of $2,000,000.

Who is Eligible: Companies pursuing new or expanded facilities with a total project costs in excess of $20,000,000 or equipment upgrades with a total project cost in excess of $2,000,000 are eligible to apply to the Board of Economic Development for a reinvestment payment under this program. One of the key criteria considered by the board when approving or denying an application is the likelihood the project would have occurred without the reinvestment payment.  Reinvestment payments are intended for projects that would not have occurred without the payment. The following projects are not eligible for a reinvestment payment:

  • Buildings or structures used predominantly for the sale of products at retail, other than the sale of electricity at retail, to individual consumers;
  • Buildings or structures used predominantly for residential housing or transient lodging;
  • Buildings or structures used predominantly to provide health care services;
  • Buildings or structures used predominantly for the transportation or transmission of natural gas, oil or crude oil by means of a pipeline; or
  • Buildings or structures that are not subject ad valorem real property taxation or equivalent taxes measured by gross receipts.

How it Works: The project owner applies to the Board of Economic Development for a reinvestment payment no later than 90 days after starting construction. If the board approves the application, the project owner must comply with the conditions of the approval, to include the payment of all taxes it owes on the project before it receives the payment. At the conclusion of the project the project owner files an Affidavit for Reinvestment Payment with GOED, and if all of the conditions of the reinvestment payment have been met, GOED issues the reinvestment payment to the project owner. The following steps outline the process in more detail:

  1. Timely file an application with GOED within 90 days of start of construction.
  2. After GOED has received the completed application, the applicant may make a written request to GOED for the board to take action to approve or deny its application for reinvestment payment.
  3. Within 90 days of board approval of the application, the applicant shall accept the approval in writing.
  4. Within 30 days after written acceptance is received, GOED shall issue a permit entitling the applicant to submit an affidavit for reinvestment payment.
  5. Construction on the project begins. The applicant is required to notify GOED within 30 days from the date of construction.
  6. Applicant files quarterly progress reports as required by GOED.
  7. Applicant submits the affidavit for reinvestment payment with GOED, along with any required conditions of the approval, within six months of completion of project.
  8. The payment will be remitted within 90 days of receipt of the affidavit and required information.

South Dakota Jobs Grant Program

Purpose: This program is available to assist companies in offsetting the upfront costs associated with relocating or expanding operations and/or upgrading equipment in South Dakota. The program allows for project owners to receive a South Dakota Jobs Grant for new or expanded facilities with project costs less than $20,000,000, or for equipment upgrades with project costs less than $2,000,000.

Who is Eligible: Companies pursuing new or expanded facilities with a total project cost of less than $20,000,000 or equipment upgrades with a total project cost of less than $2,000,000 are eligible to apply to the Board of Economic Development for a South Dakota Jobs Grant under this program. One of the key criteria considered by the board when approving or denying an application is the likelihood the project would have occurred without the South Dakota Jobs Grant. South Dakota Jobs Grants are intended for projects that would not have occurred without the grant. The following projects are not eligible for a South Dakota Jobs Grant:

  • Buildings or structures used predominantly for the sale of products at retail, other than the sale of electricity at retail, to individual consumers;
  • Buildings or structures used predominantly for residential housing or transient lodging;
  • Buildings or structures used predominantly to provide health care services;
  • Buildings or structures used predominantly for the transportation or transmission of natural gas, oil or crude oil by means of a pipeline; or
  • Buildings or structures that are not subject ad valorem real property taxation or equivalent taxes measured by gross receipts.

How it Works: The project owner applies to the Board of Economic Development for a South Dakota Jobs Grant no later than 90 days after starting construction. If the board approves the application, the project owner must comply with the conditions of the approval, to include the payment of all taxes it owes on the project before it receives the grant. At the conclusion of the project the project owner files an Affidavit for South Dakota Jobs Grant with GOED, and if all of the conditions of the grant have been met, GOED issues the grant to the project owner. The following steps outline the process in more detail:

  1. Timely file an application with GOED within 90 days of start of construction.
  2. After GOED has received the completed application, the applicant may make a written request to GOED for the board to take action to approve or deny its application.
  3. Within 90 days of board approval of the application, the applicant shall accept the approval in writing.
  4. Within 30 days after written acceptance is received, GOED shall issue a permit entitling the applicant to submit an Affidavit for South Dakota Jobs Grant.
  5. Construction on the project begins. The applicant is required to notify GOED within 30 days from the date of construction.
  6. Applicant files quarterly progress reports as required by GOED.
  7. Applicant submits the Affidavit for South Dakota Jobs Grant with GOED, along with any required conditions of the approval, within six months of completion of project.
  8. The payment will be remitted within 90 days of receipt of the affidavit and required information.

Updated 1/6/15

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